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OVERVIEW. Puget Sound is the economic heart of the Pacific Northwest. For our purposes we'll consider the Pacific Northwest as the states of Washington, Oregon and Idaho, plus the Canadian province of British Columbia in extreme western Canada. Our resource-rich region is intimately related by trade activities to the entire Pacific Rim; especially Japan, Korea, Hong Kong, Singapore, and increasingly China. The resource-hungry "East" is a source of export for agricultural products, forest and timber products, minerals, passenger airplanes, machine tools and high-tech communications hardware and software. Washington State as a statistic, is first in the U.S. in exports per capita at $5,945 (2005, latest figures available). In turn we import from the Pacific Rim autos, clothing and manufactured goods. We are most closely connected in terms of geographic distance for shipping to the major economies of the Pacific Rim. Electric energy from waterpower is the only major regional resource we do not export to the "East". Trade, however, is our primary business; so in addition to product import-export, we have a huge business in trade support: railroading, shipping, marine facilities, trucking, warehousing and distribution, communication, and banking and insurance. Nationally real estate sales, on an annualized basis, continue well above 5-million housing units. Home sales figures for Puget Sound indicate an average increase in housing sales over the past five years of 5 1/2 percent annually, at a rate of over 75,000 units per year.
The population of the Pacific Northwest now exceeds 15.9 million. Over the past two decades the northwestern United States has a set of conditions attractive to residents and businesses alike. Population growth rates in the Pacific Northwest have been impressive for the past decade. Idaho was the fastest-growing PNW state with 27-percent growth for the decade to 1.51 million. Washington State grew 20-percent during the same period to 6.37 million. Oregon's population grew 18 percent during the decade to 3.72 million. Lastly, British Columbia, Canada's most westerly province, is also Canada's most rapidly-growing province. Population growth rates exceed two percent per year for the past decade. Half of the 4.31 million B.C. residents live in Greater Vancouver, now a metropolis of over 2 million.
However completely one understands the importance of trade and its related activities to the Pacific Northwest, even more important is our favorable position in Alvin Tofler's "Third Wave" - the economy of the "knowledge" worker. Whether the reader can accept this or not, the United States is leading the world in technological evolution and those cultural changes necessary to technological shifts. Always, technological change, to be effective, must be accompanied by changes in current mythology in order to overcome the usual and inherent resistance to change - change of all kinds. Change destabilizes so it is inherently resisted in every human culture. In the end, technology always wins but the transition can be painful and enduring. It remains to be seen whether we can make the new and most important shift in recorded history; industrial worker to technological "knowledge" worker, a world where change is the only real constant.
As we begin the new millennium, four economic sectors will assume preeminence - computers, telecommunication, automation/robotics and re-education (continuous learning). These sectors will lead the "new" economy, and are the domain of the knowledge worker. Demand for more knowledge workers is insatiable and the U.S. has had for many years a tight labor market for these workers. Immigration from a world filled with uncertainty is helping to ease our demand for knowledge workers. The keys remain; education, re-education, and re-training. For the Pacific Northwest, and especially Puget Sound, our time has come. Washington State has the 4th highest hourly wages, after New Mexico. Massachusetts, and New York; just over $20/hour. Our inventory of knowledge workers is increasing more than 15 percent per year. Washington is 1st in "high-tech" salaries, at $142,807 per year/employee (and $219,000 per year in the specific "software industry"). Our per capita technical employment is third in the U.S. after Virginia and Massachusetts. As further confirmation of the important role "high-tech" industry plays in Washington, we are third in the nation in computer ownership and third in Internet "connectedness". Small companies have the greatest employment growth rates. Washington is second in the nation in employment growth for "start-up" companies (after Utah) and had in 2005, average employment growth of 28.2%! Washington is also first in the nation in company creation (relative to the size of the workforce), and leading No. 2, California, by more than 19% in 2006. On the other hand, Washington has the highest cumulative business tax base in the U.S. and the lowest personal tax base. Overall, our workers currently (year 2006 figures) have average annual high-tech wages of $40,385 at a time when all private workers in Puget Sound average $28,100 per year. We also rank 4th in industrial Research & Development expenditures (by state) at $1,504 per capita per year (2005 data).
PUGET SOUND. Regional economics continue to follow patterns established in 1989, despite stock market anxieties and rising unemployment following "911". For the nation as a whole, the year 2007 will have continued modest growth, very impressive "productivity" improvements and very low inflation. Following a rise in unemployment for almost a year, the last quarter of 2006 indicates some increase in local employment, a significant increase in "defense" spending, and corporate earnings that are now rising, but still ranging from terrific to terrible. The corporate profits that topped out about three years ago coincident with historically high price-earnings ratios, have stabilized; except in travel and related sectors: aircraft production, air lines, hospitality, entertainment and theme parks. Even these sectors have begun to show recent strength. The stock market remains extremely volatile! It's hard to understand how so many of the public can think that rising stock averages are their due.
Mortgage and other interest rates are, as we write, about 6-percent, almost 45-year lows. Home loan rates rose briefly late last year on inflationary fears, but have since dropped impressively. We predict that these low rates will continue at least for the next year or two, as the economies of Asia and Europe soften dramatically. Meanwhile, the entire Pacific Northwest, and especially Puget Sound, continues to be a relatively good environment for both business and real estate. Considerable "downsizing" has already occurred within the dot-com community and among some other "high tech" industries; however, there is still a shortage of regional, skilled technical workers. Some local dot-coms will continue to be hit hard as exuberance for their sometimes "mysterious" products finally yields to reality. Nonetheless, many "wireless" and telecommunication companies continue to do well, showing impressive growth. The deck chairs are continuingly being rearranged but there is still enormous entrepreneurial energy in the Pacific Northwest.
Despite the horrific events of "911" involving airliners, the Boeing Company is poised to become one of the economic engines of the 21st-century. They still have problems; "competing" with the subsidized five-nation governments attempting to sell airframes that are (appropriately) called "airbuses". With the rapidly softening economies of the EU, these governments will find it increasingly hard to sustain their inefficient airframe employment base. Second, Boeing is still wrestling with the problems of "digesting" the whale they are attempting to eat (McDonnell Douglas), however, the strategy of their strengthening defense sector looks sound. Lastly, Boeing continues to find effective strategies for wrestling with their Byzantine labor unions, which simply don't get it! They too will eventually be drawn into, first the 20th and then the 21st-century - the Third Wave. We suspect that Boeing has used the events following "911" to announce large layoffs. In reality typically a third of the announced cuts are implemented, apparently to "cull some deadwood" and in response to continuing profit squeeze in the airframe business. Nonetheless, the activities of Boeing in Puget Sound have a major impact, and we predict that their employment will rise somewhat for the next three to five years; following their incredible sales of 2006: 1044 planes! Annual sales of $127 billion! One very bright spot. Real estate in most of Puget Sound is selling at record prices, though at rates less than the halcyon days of 1998-1999. Seattle, Bellevue and Redmond now average home prices near national records. Housing "affordability" has become a serious challenge in Puget Sound.
WHIDBEY ISLAND. Located in northern Puget Sound, about four air miles west of Everett, Whidbey is benefiting from technology industry expansions that have continued for the past eight to ten years. The "mainland" areas of Mukilteo, Everett and Seattle are increasingly attractive to "high-tech" start-up and expansion. Boeing's large-plane plant at Everett produces the largest-selling passenger aircraft in the world. A number of Boeing employees live on Whidbey and "commute" daily to the mainland. The once traditional industries of forestry and agriculture have, since the 1940's, passed to the U.S. Navy with its large air station at Oak Harbor. The Navy is by far the largest employer. Annual budgets of almost $300 million provide employment for about 9,000 military and civilian jobs. In 2006, traditional industries employed a mere 2.6 percent of the labor force, while government and public schools employed approximately 60-percent of the labor force.
The Island is one of two large islands that together with a few islets make up Island County. The county seat is Coupeville. There are only three incorporated places: Oak Harbor (22,300 population), Coupeville (1,800 pop.) and Langley (1,000 pop.) but these contain more than half the entire island's population. Total island population is now 58,900; the "northern half" having about 35,400 and the "southern half" about 23,500. The average per capita income in 2005 was $28,278 - island-wide. We estimate that South Whidbey household incomes are now over $80,000. Preliminary 2005 update Census details on income are not yet complete, but we suspect they have risen substantially from the 2000 base. These income differentials partly explain the dramatic apparent differences between the social character of North Whidbey and South Whidbey.
RELOCATION AND REAL ESTATE. Corporate relocation is an important segment of real estate activity in Puget Sound. On Whidbey Island, however, relocation serves primarily the needs of the U.S. Navy and the needs of retirees. We really understand the Navy relocation situation and are here to assist them in all aspects of relocation to or from Whidbey. We know what its like to have a family relocate to a new station in an unfamiliar community, while the military member is deployed. We'll assist with rental or purchases, Navy housing options, financing, schools, utilities and the many other details of relocation. We Americans owe our military our gratitude. They continuously work to preserve the freedoms we citizens so often take for granted. Retirees and others "escaping" to the rural sanity of Whidbey Island have terrific data resources available to them. Every month we have 300 unique visitors come in through our websites. We also send relocation packets or supplements to 250 inquiries per year.
The year 2006 was an unusual year for Whidbey Island real estate. Residential sales dropped a whopping 34-percent, most affecting the Oak Harbor area; where pricing has just outrun the marketplace. On the whole island, north and south, 1,062 residential sales - 127 new "spec" homes (down from last year's 198 "spec" construction homes), 977 single-family homes and 174 manufactured homes and condos. Total industry residential sales during 2006 aggregated to $394.5 million. Generally, other than the increase above last year's (2004) more active market, all trends suggest that 2007 will look much like 2006.
During 2006, the 1,151 residential home sales, island-wide, had a median price of $343,100. On North Whidbey, the 490 previously built homes had median prices of $260,000, while median new homes sold for $305,200. On South Whidbey, the 445 existing SFD homes sold at median values of $349,900, and 55 new "spec" homes, $360,000."Spec" homes, those built first and then sold, continue to decline in number and relative dollar value. Only 127 such new homes were sold. Expensive "spec" homes (those above $300,000) sell very slowly; most of these on South Whidbey. Each year custom home construction (houses 'built to order') increases in number of units and values. Waterfront properties sold quite well.
Depending upon what part of the U.S. you come from, real estate values will generally appear to be affordable. Only if you come from the South or Midwest, should you expect to find housing more expensive. We too face the "affordability" problem; however, we have prices that, while not "cheap", are affordable for most new residents. Unfortunately, we have little low-priced housing on South Whidbey, requiring that some who would choose to live there are finding they must buy further north on Whidbey where housing costs are lower. There's still a wide variety of land and acreages for those who choose to build. Even waterfront is available - for those willing to pay the price. Currently, (January 2005) homes on North Whidbey average $267,300. On South Whidbey the average is $397,600. Land averages about $15,000 to $35,000 per acre based on our standard 5-acre zoning, more for view land. Building lots have a median value of $46,000. Waterfront property can be very expensive, but is available. Expect to pay more than $200,000 for good "Sound-frontage" and much more for "no-bank" waterfront. Building costs are quite reasonable. Electric power rates are very low by national standards. Domestic water is generally abundant and extremely inexpensive. Property taxes here are the second lowest of any county in Washington State. For 2007, Whidbey Island tax rates average $9.64 per thousand assessed valuation. Also, there is no state income tax, on earned or unearned income.
Last Updated: 02/01/07
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